updated 07:55 am EDT, Tue March 27, 2012

Foxconn and Sharp make manufacturing pact

Foxconn under its Hon Hai Group name and Sharp have together struck a deal that will primarily help Sharp improve its performance. Sharp will agree to use more third-party parts in its manufacturing in return for Foxconn taking a 46.5 percent stake in Sharp's Sakai, Japan LCD plant, equaling Sharp's stake after including an existing seven percent Sony involvement. Both companies would share research work and form a "global" alliance that would let Sharp use Foxconn's production.

Sharp, in making the deal public, explained it as necessary in the light of "intensified competition." Rapidly dropping prices and an overall change in the competitive climate were necessary, it said. The Sakai plant was portrayed as being at risk and getting "stable operation" through Foxconn's stake.

The Japanese firm has been under pressure in a heavily saturated TV market where fewer people are upgrading than in years past and in which companies like LG, Samsung, and relative newcomers like China's Haier can potentially undercut higher Japanese pricing. Sharp has been gradually shifting production to mobile to help compensate.

Apple may be a large beneficiary of the deal. Foxconn is its main contract manufacturer, and Sharp is widely known to be supplying iPad LCDs with a possibility that it might also make iPhone LCDs for later this year. Guaranteeing supply from Sharp would be important to Apple's production, and Foxconn may improve its own techniques by rolling in developments from Sharp.